The IRS scandal started in Washington

July 19, 2013

We’re starting to understand why Lois Lerner took the Fifth about her role in the IRS targeting of conservative groups. The testimony of at least three more employees in the IRS Washington office is now making clear that Ms. Lerner and other Washington IRS officials had a direct hand in slow rolling the tax-exempt applications of conservative groups in an election season.

The House Oversight Committee holds another hearing Thursday that will showcase some of these witnesses. According to Washington IRS tax law specialist Carter Hull, his supervisor Ronald Shoemaker and Manager of Exempt Organizations Technical Michael Seto, tea party applications were intentionally singled out for extra layers of review and put through an unusual process.

Mr. Hull told House investigators that normally his judgment about applications would have been enough to approve or deny their tax-exempt status. Instead of sending those applications through the normal channel, however, conservative applications were sent through Ms. Lerner’s office for review, and also directed to the IRS chief counsel. That process was highly unusual and created a vetting system in which applications were interminably delayed.

According to Mr. Hull, starting in April 2010, he was told by a supervisor to give extra attention to some tea party applications as a trial run for how the agency might handle such cases going forward. As part of that process, he was instructed to send the applications through Ms. Lerner’s office and the office of IRS Chief Counsel William Wilkins for additional scrutiny.

Once he delivered them, however, the process stalled and the applications mouldered until August 2011, when Mr. Hull met with Mr. Wilkins’s staff and Ms. Lerner’s senior adviser to discuss the applications. Mr. Hull was told the applications had been on the shelf too long and needed updating. “I was taken aback,” Mr. Hull said of the request, which added even more time to the already delayed applications. “I hadn’t had the case for a while. I couldn’t ask if I didn’t have the case.”

This routing process is significant in part because the chief counsel is one of only two political appointees at the IRS. Sending applications through that office ensured that a Democratic appointee and his staff could act as a filter for conservative groups’ applications. According to Ron Shoemaker, who supervised Mr. Hull, the counsel’s office was especially interested in evidence of groups’ “possible political activity or political intervention right before the election period” in 2010.

Getting the advice of in-house lawyers isn’t unusual, but extended delays of the applications was. One important question will be whether Mr. Wilkins was personally in the loop on the extended vetting. In May, the IRS issued a statement specifically denying that Mr. Wilkins was at an August 2011 meeting about tax-exempt groups that was noted in the original IRS report from Treasury Inspector General Russell George. The IRS said at the time that Mr. Wilkins “is not involved” in the tax-exempt arena and didn’t know about the issue until sometime this year.

Count us skeptical that, as head of the IRS’s legal shop, Mr. Wilkins wasn’t aware of the questions and evolving procedures for handling 501(c)(4) applications. When he was appointed to the IRS job in April 2009, the White House announcement emphasized his expertise in “counselling non-profit organizations.”

As a partner at Washington D.C. law firm WilmerHale in 2008, Mr. Wilkins helped lead the defense of Chicago Reverend Jeremiah Wright’s United Church of Christ when the IRS investigated then Senator Barack Obama‘s involvement with the church for any violations of its 501(c)(3) status. “We were so interested in the case we offered to do it pro bono,” Mr. Wilkins told The American Lawyer at the time.

When the targeting scandal broke, Democrats insisted that the whole operation was nothing more than a goof by Cincinnati employees. Former IRS chief Steve Miller testified in May that it was all a case of bad customer service by employees trying to be “more efficient in their workload selections.” White House Press Secretary Jay Carney tried to cabin the scandal as “line IRS employees in Cincinnati improperly scrutinizing 501(c)(4) organizations by using words like ‘tea party’ in quotes and ‘patriot.'”

The new testimony makes the Cincinnati excuse look even more feeble than it sounded then. In a letter this week to acting IRS Commissioner Daniel Werfel, House investigators have requested more information about the role of the Chief Counsel’s office. They’re also seeking documents including IRS employee discussions of the Supreme Court’s 2010 Citizens United decision that ignited Democratic fury over the growing influence of conservative groups.

Most of the media and their Democratic allies are trying to claim the IRS scandal is yesterday’s news. We’ll see if they deign to cover witnesses who say they got their orders from IRS headquarters.

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